The goal of this project is to ascertain how chronic exposure to elevated levels of fatty acids (FA) impairs insulin gene expression, contributing to the progressive deterioration of beta-cell function in type 2 diabetes. We propose that ceramide derived from palmitate suppresses PKB activity, resulting in the translocation of FoxOI to the nucleus, where it inhibits PDX-1 binding to the insulin promoter and insulin gene expression. The aims, to be examined in isolated rat islets and MIN6 cells, are as follows. Specific Aim I: To determine whether ceramide generation from exogenous palmitate inhibits PKB activation and thereby impairs insulin gene expression. Inhibition of PKB will be assessed by immunoblotting. Adv-PKB constructs will be used to rescue beta cells from the effects of FA on insulin gene expression, as assessed by RPA. Specific Aim II: To assess whether palmitate or ceramide inhibition of PKB activation leads to nuclear translocation of FoxOI and concurrent exclusion of PDX-1. Changes in protein expression from total and nuclear cell lysates will be assayed by immunoblotting. Confocal microscopy will be used to visualize protein localization. Specific Aim III: To ascertain whether FoxO1-induced nuclear exclusion of PDX-1 impairs insulin gene transcription. PDX-1 binding to the insulin promoter will be assessed by EMSA. Activity of the insulin promoter [RIP] will be assessed by an RIP-luciferase reporter that is stimulated by glucose and inhibited by FA. Adv-PKB variants will be used to counter the effects of FA on PDX-1 binding.